Retailers have long cited the fourth quarter as crucial to their survival. But with consumers splurging less and trying to save more, businesses are bracing for yet another tough holiday season.
Paul W. Gillespie — The Capital Tom Saquella, president of the Annapolis-based Maryland Retailers Association since 1985, said his group is helping its members market themselves online while lobbying to keep the state’s new tax-free holiday next year.Tom Saquella, president of the Annapolis-based Maryland Retailers Association since 1985, sat down with The Capital last week to talk about how retailers will fare during the most important quarter of the year, a new partnership with Local Roll Call to promote online marketing and how his group is lobbying to keep the state's new tax-free holidays.
The following is an excerpt of that interview.
Q: They say the recession is over, but what is the reality for retailers?
A: I think for retailers we'd like it to be over, we're certainly hoping it is, but I don't think we've seen that real light at the end of the tunnel yet. There was some improvement looking at sales tax receipts for July. That's the best estimate you can get in Maryland is through the statewide sales report. There was some improvement; the amount of decrease the previous year was down. The August numbers should be coming out pretty soon.
Q: Last year your organization predicted shoppers wouldn't increase their holiday spending - that was the first time in decades. What is your prediction for this holiday season?
A: I think most retailers are sort of hoping for the best, but they are realistic in preparing for a replay of what happened in '08 as well as '07. We'll come out with our official forecast in November. In fact the membership surveys haven't gone out. They have to go out next week.
Reading what the industry is saying in other parts of the country, a lot of people are thinking things are going to be better this holiday season, but I'm anxious to see what my members tell me in their survey response.
Q: When you say better this holiday season, why do you say that?
A: We're hoping for some pent-up demand. And I think the economy continues to improve. I think we'll see a better consumer confidence go up with it. I think the major drawback right now would be the employment rate, which nobody expects to get any better. Hopefully it will not get any worse between now and the end of the year.
I think everyone sense things are started to turn, but the consumer really hasn't. It's going to be the last one to turn around.
Q: Which (retail) categories will be the winners this year and what are some of the losers this year?
A: The last good month we had in the state in retail was November '07. Discount stores and places like that are doing the best. The ones that are hurting the most are certainly jewelry stores, (they) have taken it tough.
Furniture stores are (doing poorly) because their problems started a year before anyone else with the housing slump. I don't know how many members I've lost in the furniture stores. They have certainly taken it the hardest.
Q: Despite the gloomy forecast, is Maryland's holiday spending picture still better than the national picture?
A: That's not as clear as it used to be. We always ran ahead nationally. It's tough to get an apples to apples comparison. Nationally, the figures are put out by the Commerce Department and there's various other surveys done by private groups, they are all national.
In the state, all we can really look at are sales-tax returns, which are pretty good because they come 30 days later and everything else. So it helped to get a real apples-to-apples, orange-to-orange comparison. But our sales-tax declines, for the most part over the last year or so, have been greater than the sales declines nationally.
Q: How much greater?
A: Sometimes one or two percentage points. But I'm not saying that's a good comparison, that's just a guess. Clearly, we're not as far (ahead) nationally as we used to be and we may be running behind.
Q: What is your group doing from an advocacy standpoint to help retailers?
A: We were approached by a lot of different stations for a "promote local shopping." And we finally went with WBAL TV, which is launching a new program called Love Local Maryland, which is going to be a promotion starting, I would imagine, in the next two weeks that will use their advertising on TV to promote local shopping and drive shoppers to their local Maryland Web site.
It will provide more exposure to those retailers who participate. We've got a couple other local stations approach us, too. We thought Channel 11 had the best offering for that.
We struck a partnership with a company called Local Roll Call. It's just getting off the ground, literally just getting off the ground. It's payoff for the holiday season will be hit and miss. But I think in the long term it's going to pay off for our members.
Q: What exactly does the partnership entail?
A: A lot of retailers already have Web sites. Most of them are not well designed from a search-engine marketing (standpoint.) In other words, you put in key words and it should be getting this retailer, it won't get that retailer. It won't design a new Web site but it will tell them, "Here's what you got to do to make it better."
You'll get better ranking in the search engines which is a big thing. (Local Roll Call) will teach them how to work with Twitter, Facebook. It will actually do some videos for them if they want.
And really it's generally speaking consulting services. And we're going to have a few advantages. Local Roll Call is a local search engine if you will but we're going to have an MRA (Maryland Retailers Association) page on it and stuff like that, as well. Everything is just getting just started.
Q: Retailers are embracing everything from social marketing to lowering their prices. How important is it for retailers to find new ways to reach customers?
A: It's really critical, especially for the independent retailers who don't have access, like the big stores with the mass advertising. I've always felt that online marketing, whatever they call it, really for an independent store, really broadens their market. If you sell, like a lot of stores on Main Street, some pretty unique merchandise, you can greatly expand your market.
Look at my son, he's 28. I hate to say it, he never reads newspapers. He's extremely knowledgeable about current events. Everything he gets online. And how do you reach that under 40?
I had some people here from The Sun during the summer. They almost knocked me over. They said the average age of their readers is 57 years old. I couldn't believe it. I said I knew it was high. It's the average. So, you know, when you look at those demographics and what's happening you've got to reach those younger shoppers.
They're not all that young anymore either, I mean they are getting in their 30s, they are at prime buying ages, people who shop the most, families. They are used to finding out what's going on through those online mediums and they provide tremendous flexibility, tremendous flexibility in designing a very targeted marketing effort or whatever you are going to do. They have a lot of potential there.
The typical retailer goes, "Something else I gotta learn? Like I don't have enough to do already." Well yeah that's what it comes down to.
Q: On a large scale, are you seeing retailers embrace new technologies?
A: Almost all have Web sites now, which they use for marketing. Three or four years ago, not many of them had Web sites at all. They really didn't. They were very basic. Now they see that, I think retailers realize they have to be as current as they can be.
Q: Retailers are closing in Annapolis, across Maryland. Do you expect more closing before the first of the year?
A: I wouldn't say maybe before the first of the year because it's the holiday season, you always want to see if you can grab it there.
I think after the first of the year you'll see what we saw this year in the first quarter, a lot of closings, both big chains were closing underperforming locations as well as independent retailers who simply quite frankly don't have money. It's very difficult to get good financing. Terms have changed. Conditions have changed. It makes it very difficult. They literally are just running out of money and they have to close the doors.
Q: With the closings, how has this affected your membership numbers?
A: We're feeling it. Our membership's down about I want to say 8 percent. We thought it would be worse. We are satisfied the way we've weathered it so far. And our pitch to the membership is you know you need us now more than ever.
Q: Are you lobbying for any new legislation to help retailers starting next year?
A: We haven't finished our legislative program yet, but one of the things we're concerned about of course the state's fiscal situation is that two tax-free holidays are planned next year. One next August for clothing and the following February, February 2011, actually, for energy-efficient appliances.
Since the state does lose revenue on these, they may become a victim of the state's fiscal situation. We're very concerned about that. We noticed a lot of states sort of kicked (off) their tax-free back to school holidays in August. There's some commentary we'll call it analysis (suggests) commentary that states which had the tax free week did better on back to school than those that didn't. I describe it as commentary, no hard numbers like that. I hope that wasn't the case.
Q: Anything else other than the tax free?
A: We're looking at general business issues. We're probably looking at extremely high increase in employment insurance taxes which doesn't require a legislative action. We're still concerned about tax increases, as well.
People are splurging less and saving more. How do you think that the retail landscape will change in the years to come?
That's a good question. It's been a long recession, and a very deep recession and I think a lot of people have seen their wealth decline; their housing values. They are going to be less consumption-oriented and more about saving.
So I think we're in for the immediate future, not the kind of buying that we had seen really going back to the mid-80s. Really you're going to see some fundamental changes over the next five years.
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